Fed’s Decision to Hold Rates May Spell QE3, Standard Life Says

Aug. 10 (Bloomberg) -- The Federal Reserve’s decision to
hold interest rates near zero through at least mid-2013 will
boost equity markets and may herald a third round of
quantitative easing, according to Standard Life Plc.

“There’s evidence of policy makers taking action, and
that’s very important,” Keith Skeoch, chief executive officer
of Standard Life Investments, said in a call with reporters
today. “The signal that interest rates are staying down for a
long period of time also opens up the prospect of further policy
action through QE3 if for some reason growth should fade.”

Fed Chairman Ben S. Bernanke provoked the most opposition
among voting policy makers in 18 years as three colleagues
disagreed with the decision to give a specific date to the
central bank’s low-rate pledge for the first time. The STOXX
Europe 600 Index rallied as much as 2.2 percent today, the
biggest gain since September 2010.

“It was an appropriate move and very well-designed in
bolstering sentiment and giving a long-run signal,” said
Skeoch, who runs the investment arm of Scotland’s biggest
insurer. “It should be helpful for markets in the next couple
of days.”

Slowing global economic growth, Standard and Poor’s
downgrade of the U.S. credit rating and a failure to resolve the
euro-zone debt crisis have pushed the MSCI World Index to its
lowest level since September 2010. The FTSE 100 Index briefly
entered a bear market yesterday after falling 20 percent from
its high in February.

“We’ve obviously been through quite a difficult period
when markets are mainly driven by fear and panic,” Skeoch said.
“Equity markets are discounting zero corporate growth if any.
What you’re beginning to see is the emergence of value. The
triggers for that value to emerge will take a little while to
come through.”